Gather data on CAP member behaviour to inform communications in a crisis

In normal circumstances, pension plan members don’t respond well to being inundated with information about their plans.

Typically, a deluge of content can turn off plan members, says Jillian Kennedy, leader of defined contribution and financial wellness at Mercer Canada. But today’s circumstances are far from ordinary. “Right now, you can’t over communicate.” 

In 2008, the financial crisis gave plan sponsors some experience in how to communicate with members in a crisis, but the market fallout from the coronavirus pandemic is very different, she says. “This is something that’s personally affecting people. It’s emotional. It’s psychological. And we’re getting calls from employers saying they’re getting inundated with hundreds of requests from employees. So we knew pretty quickly that a macro communication was not going to be enough.”

Read: Managing a capital accumulation plan through coronavirus

To inform effective communications, plan sponsors can seek out reporting from their record keepers on how their members are reacting to the crisis, says Zaheed Jiwani, a principal at Eckler Ltd. “You can see how often they’re looking at their investments and how often they’re logging into the website and really just understanding what’s happening within your membership.”

Other prudent information gathering in a crisis includes checking in with other third parties that plan sponsors work with, such as investment managers. The majority of CAPs use target-date, target risk or a balanced fund, so plan sponsors should touch base with their managers so they have an idea of how those vehicles are navigating the crisis, he says.

“In TDFs, you have some automatic rebalancing that might be baked in. So how are they managing that rebalancing when certain markets are moving much faster than others, that may force them into rebalancing when it may not be opportune?”

Read: Should early access to retirement funds be allowed due to coronavirus?

Over the last few weeks, wild trading in the markets has caused serious liquidity constraints, potentially creating situations where normal securities transactions cost more for investment managers to complete, says Jiwani. “We’ve seen at least one fund has closed to redemptions on one of the DC platforms. And that could be because . . . it’s really hard to understand pricing right now in the market. Liquidity is not where it normally would be. Just because people are selling rapidly doesn’t mean there’s a lot of liquidity; there’s actually a lot less liquidity in a market like this.”

It can become more complicated to keep track of investment managers can where a plan sponsor provides an a la carte menu of investment funds, he adds. “How are those being impacted? What’s the business continuity plans of all the different investment managers that you have within your lineup? And then, if we translate that to the members, how are members reacting?”

And, since a market crash of this magnitude can throw things normally taken for granted into doubt, Jiwani says it can be comforting for plan members to know their plan sponsor is still making pension contributions.

Read: Will coronavirus push changes to CAP landscape forward?